Word of the controversial law's scrapping elicited cheers from crowds of demonstrators in Kiev's Independence Square, a focal point of the opposition rallies.

While loyalists in Mr Yanukovych's Party of Regions said they had acted in the best interest of Ukraine to find a compromise, opposition leaders said the protest movement would press for more gains.

"We are sure that the struggle will continue," world champion boxer-turned-opposition politician Vitali Klitschko said.

"We have made only one step... we have not yet settled everything."

He said opposition lawmakers would now press for an amnesty for activists detained by police in the unrest.

"We have to change not only the government but the rules of the game as well," Mr Klitschko said.

Prime minister quits to 'peacefully resolve' conflict

In announcing his resignation, Mr Azarov said he hoped his departure would create "an additional possibility for a political compromise to peacefully resolve the conflict", which has seen protesters take to the streets for the past two months.

Under Ukrainian law, the entire government has to resign if the prime minister leaves office.

Ukraine's controversial anti-protest laws:

Made the occupation of public buildings punishable by up to five years in prison.

Outlawed protest convoys of more than five cars.

Imposed a ban opposition activists wearing masks or helmets.

Dissemination of slander on the internet was also banned and punishable by a fine or corrective labour of up to one year.

"I have taken a personal decision to ask the president of Ukraine to accept my resignation from the post of prime minister," Mr Azarov said in a statement.

"The government has done everything during this standoff for a peaceful resolution of the conflict," he said, adding that his cabinet had been forced to work in "extreme conditions".

"The most important thing is to preserve the unity and integrity of Ukraine. This is far more important than any personal plans or ambitions. That is why I have taken this decision."

Mr Yanukovych said in a statement: "I accept the resignation of Mykola Azarov and as a consequence the resignation of the entire Ukrainian government."

However, he has requested they stay on in a caretaker capacity until a new government is named.

Large demonstrations have been held in Kiev since November when Mr Yanukovych pulled out of a free trade deal with the European Union, in favour of closer economic ties with Russia.

Mr Klitschko welcomed Mr Azarov's resignation but said the opposition movement wanted the government to change.

"For several months we have been saying that what is happening in the streets is also the result of the policies of the current government," Mr Klitschko, leader of the UDAR (Punch) party, said.

Mr Klitschko had said the removal of the anti-protest laws, which were approved only this month by the parliament that is dominated by Mr Yanukovych's Regions Party, was a key demand of the opposition.